Home » Nigerian Brewers Face Huge Losses as Debt Costs Soar

Nigerian Brewers Face Huge Losses as Debt Costs Soar

How the rising cost of borrowing has eroded the profits of the major beer companies in Nigeria

by Motoni Olodun
Nigerian brewers

Nigeria’s beer industry is facing a tough challenge as the rising cost of borrowing has eroded the profits of the major brewers in the country. According to a BusinessDay report, Nigeria’s three leading beer companies – Nigerian Breweries, Guinness Nigeria, and International Breweries – incurred a combined loss of N89 billion in 2020, compared to a profit of N37 billion in 2019.

The report attributed the dismal performance of the brewers to the high-interest expenses they had to pay on their loans, which increased by 40 percent from N48 billion in 2019 to N67 billion in 2020. The brewers had borrowed heavily in recent years to finance their expansion plans and cope with the economic downturn caused by the COVID-19 pandemic. However, Nigeria’s high inflation rate and exchange rate volatility have made it difficult for them to service their debts and maintain their margins.

The beer industry in Nigeria is also facing other challenges, such as the decline in consumer spending power, the increase in excise duty and value-added tax, and stiff competition from other alcoholic and non-alcoholic beverages. The COVID-19 lockdown measures also affected beer sales, as bars, restaurants, and hotels were closed or operated at reduced capacity.

According to a market research report by Euromonitor International, Nigeria’s beer market is expected to grow by 5 percent annually from 2020 to 2025, but this growth rate is lower than the 7 percent recorded from 2015 to 2020. The report also noted that the beer market in Nigeria is dominated by Nigerian Breweries, which has a 54 percent market share, followed by Guinness Nigeria with 21 percent and International Breweries with 16 percent.

Brewers are trying to overcome these challenges by adopting various strategies, such as introducing new products, reducing costs, diversifying their revenue streams, and exploring new markets. For example, Nigerian Breweries launched a new brand called Tiger Beer in 2019, which targets the market’s premium segment. Guinness Nigeria also launched a new product called Guinness Smooth in 2020, which is a low-alcohol beer that appeals to younger consumers. International Breweries has expanded its portfolio to include non-alcoholic drinks, such as malt beverages and energy drinks.

The beer industry in Nigeria has a lot of potential, as it is one of the largest and most populous countries in Africa, with a young and urban population that enjoys social drinking. However, brewers must overcome the current challenges and adapt to the changing consumer preferences and market dynamics. They will also have to invest more in innovation, marketing, and distribution to gain a competitive edge and increase their profitability.

Source: BusinessDay

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